Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

I'd expect more events like the recent boom in stock prices in spite of massive global unemployment and the wave of unrest nicknamed the Arab spring which came after 2008 and had origins in economic disruption. Revolutions often come after the unbearable has passed.

Even if we quickly overcome the virus the global economic impact of the lockdown and QE will be severe and long lasting. It's quite possible that due to QE/stimulus none of that will show up in stock prices and they will shoot up, boosting inequality again.

Formerly Chinese (and sometimes subsidized I suspect) dirt cheap items might become a lot more expensive. Non stick frying pans and pool swim noodles type things. I can't believe that returns exactly to how it has been.

I'll point out just two deficiencies in these threads and leave the rest to you. If P/E ratios in the US are "too high," then people would invest their money elsewhere for better return, right? Maybe international stocks or bonds or whatever. And why don't they, if they have every incentive to seek a better return? Because there are no better returns, even in countries with higher interest rates. So how could P/E ratios be too high? The more likely explanation is that this is the "new normal" - savings outpaces investment opportunities for many reasons (aging populations, growth in countries with stronger saving cultures, etc.), which pushes up the premium on assets.

Second, on the subject of interest rates and QE, a little international perspective would make you reconsider the effect on the overall economy. All other developed economies have lower interest rates, more QE, and slower growth than the US. Look at Europe, look at Japan. The issues of "why are asset prices rising" and "why is inflation low" are much larger than just US policy. We are talking global trade and demographic factors that influence these things. The current stance of fiscal and monetary policy is the symptom, not the cause. And in fact the US has been significantly more successful than our counterparts on that topic, as a fast and strong response in 2008 pre-empted the kind of drawn out economic malaise seen in Europe, where the ECB waited years before easing policy to the degree that we had. Now Europe has lower rates, more QE, lower inflation, a worse labor market, and less growth than the US. And that's before factoring in the coronavirus crisis. Policy may have increased inequality in some ways, but if you're going to make that claim you have to also answer the corresponding counter-factual: potentially the poor would have been even worse off (relative to the rich) if there were no policy interventions and the labor market collapsed. There have been some papers on the topic, and it is not at all obvious that inequality is worse now than it would have been if there was less policy intervention.

I always hear folks say "Weird there was no inflation after the 2008 stimulus" or even experts try to claim that there is none.

But it's not about inflation of everyday consumer goods, it's about the massive inflation in things that consumers don't purchase regularly (things like houses). And at this point, I think we've done a lot to essentially price regular consumers out of that market.

Think about that. We've priced regular folk out of things that build wealth. It's going to lead to something terrible down the road. Even more terrible than what we're already living in.

So, how to we get out of this trap? Most obvious answer to me is more localism. I.e., relying on local supply chains for goods (both consumables and foods) instead of a global one. This lockdown has been pretty miserable for a lot of my friends, but my one hope for a silver lining here is that after we're out of it there might be a return to prioritizing your local community over the bottom line. You don't freak out in a Pandemic if you know that your supply chains for all of this stuff are local, and unaffected by problems on the other side of the planet.

You see the conflict between these two directions with agricultural protectionism. Countries often pay to keep their agriculture industries local however inefficient they are. That's bad for the economy but good for resilience against disaster.

1. That wouldn't allow us to pause all economic activity. Not even close. Not even remotely close. Notice that 0% of the economic damage caused by coronavirus could have been prevented by stockpiling food and water.

2. Lots of economic activity is not possible to pause. Think about e.g., large construction projects or any manufacturing process. There's an enormous amount of economic activity that just can't easily be paused, at varying timescales. At the short timescale, for example, you can't simply stop pouring a foundation and come back to it later. On a longer timescale, you simply can't restart an oil well at $0 cost. These facts aren't due to bad planning. They're due to the fundamental laws of physics. And for any given type of disaster scenario, even the most resilient and localized supply chains might be disrupted. In fact, it's not really clear that localized or even redundant supply chains/processes would make you more resilient in any given scenario. There are likely fundamental tradeoffs and, even if not, individuals and small firms simply can't plan for every possible apocalypse.

3. That level of food/water stockpiling would be enormously expensive. Stockpiling would become a nontrivial drag on GDP, not only through unproductive resource allocation but also due to new frictions (e.g., moving 2 states over now becomes a five figure investment).

4. Like it or not, most folks simply don't have the means to stockpile at that scale. A waitress working 80 hours a week will never be able to afford the space and continuous investment necessary to maintain a multi-year food and water stockpile. Heck, even the largest firms with the best margins have to take on some existential risk in order to operate. At some point, the choice is between extreme resilience and having a given sector of the economy.

5. I can't find the problem you're trying to solve with multi-year food/water stockpiling. I'm having trouble figuring out what scenario would only last a few years, and would result in substantial destruction/disruption of the agricultural sector, but would not result in either a) also damage stockpiled food/water or b) trigger extinctions/mass-deaths that aren't possible to prevent through stockpiling. Literally no massive natural disaster or attack I can think of fits that bill. Not blight. Not super volcanoes. Not pandemics. Not nuclear war. Not bioterror. In none of those scenarios would stockpiling likely be particularly helpful at a multi-year timescale. Maybe in some of those scenarios stockpiling buys you a full growing season, if all of the other stars perfectly align.

Also, food production requires year round economic activity. Pausing for one week would mean mass starvation even if everyone had food stores.

People keep talking about disrupted supply chains but nothing could be further from the truth. Food is widely available as are all needed consumer goods. In my city, restaurant supply companies have shifted to producing direct to consumer boxes in a matter of days. I love to garden and am attempting to grow a lot of my own food because I'm a bit of a prepped, but even I can see that we are not anywhere close to a true SHTF moment. For the most part the economy is operating as normal for necessary goods. Most people can still go to the same store they always do and get everything needed or go o line and have it delivered.

Storing several years of food is hugely expensive and a waste of resources. Companies should not be stocking capital and supplies for 1 in 100 years Black Swans.

We could end up in a several years long pandemic or war. Should every family have a bunker, 5 years of non-perishables, weapons, bio gear, medicine, generator, generator parts etc?

It's much more efficient to have a smart restructuring program for when calamity hits and to smartly reallocate resources, capital for the new re-alignment.

Because of the system-wide effects, we are facing - even insurance is not the best product.

The 'moral hazard' is not in the bailouts themselves, but the terms of them and how exactly the bailouts are enacted.

For system-wide events that are impossible to predict, what we need is dynamic leadership (policy, action, financing).

Some parts of the system need more resiliency than others which is why we have regulations, strategic investment, reserves. And after this event those will be adjusted as well hopefully.

Unregulated markets encourage firms to engage in a sort of recklessness arms race. And IMO that’s one of the reasons why we need strong non-market-based safety nets for this type of disruption.

I see a lot of resistance to your suggestion based upon the supposed economic feasibility.

However, one angle I haven't seen discussed is: if vast swaths of the labor force did become functionally independent for up to 5 years for example, it would dramatically alter the extant leverage in the job market. Instead of a centralized union negotiating mechanism, a de-centralized negotiation mechanism runs. Wage earners decide on a case-by-case basis whether or not to accept a job offer, secure in that they can last for up to 5 years of nothing before they are in a "must-get-job" state. At scale, it might become a de-centralized lightweight form of UBI, unionizing, and general strike.

This doesn't even have to be prepper-style decentralization. If enough people work towards FIRE at the same time, then it functionally accomplishes exerting the same market pressures, except on an even longer timescale.

Note: I am NOT saying you are ignoring what I've said above. I have just seen many people make poor generalizations about government because of their experience with the American government's inability to prioritize citizens over the networth of the elite.

That's not what "moral hazard" means.

The point is large companies shouldn't be hurting for money, they have two big options on the table to generate money right now: issue stock or bonds. However, there are a lot of really stupid large companies that decided to max out their credit cards in the good times to pump up their stock price via buy backs. They can't issue bonds, but they could still issue stock. However, that would cause the price to crash, and Trumperino in Chief can't allow that to happen.

For the definition of better or worse implied by your above statements that is... almost entirely untrue. Given the entirety of the history of capitalism (and definition of capitalism) the only purpose of capitalism is to accumulate more capital within an existing system.

In fact we've seen many companies arbitrarily sink or swim -- and many successful business people will say as much. Otherwise there would be many more repeatable successes for businesses. Capitalism is not God.

0% interest rates are purely to encourage consumption now instead of later. But unfortunately, the bill always - usually? - comes due. Unfortunately, most of the common indicators, signs, and metrics are detached from each other. Maybe they always were (Keynes vs Hayek) but now they're going opposite of where "common sense" says they should.

There is a much more fair way to do this. Firms simply issue new stock and sell it to the market. Firms get the capital they need, the general tax payer isn't holding the bag.

The real problem is that we’re a month in and there’s no genuine end in sight, optimistic politicians notwithstanding. The actual end of the crisis could be two months away or two years.